The Hon’ble High Court of Madras vide its order dated 29.08.2022 in the matter of M/s D.K. Enterprises Vs. The Assistant/Deputy Commissioner (ST) Adjudication, Intelligence-I, Chennai & Another in W.P. No. 22646 of 2022, allowed the writ petition preferred by the assessee, finding that the procedure followed by the department for detaining the consignment was contrary to the statutory requirements and it was also held that in the matters of interception, seizure & detention, it is clear that the GST Department does not recognize the concept of ‘working day’ and ‘holiday’, since substantial Civil rights of the parties are at stake by the aforesaid powers.

The Petitioner filed the Writ Petition before the Hon’ble High Court seeking directions to the respondents to release the goods immediately, being a consignment of Polystardone XL-10 (consignment/consignment in question), stated to be a life-saving drug, cleared from Chennai Seaport Customs and seized/detained on 13.08.2022 at 2.15 a.m. by the Roving Squad of the Commercial Taxes Department as well as the Lorry bearing Registration No. TN 28 AP 9239.

Facts of the Case: –

• The Consignment in question was intercepted on 13.08.2022 at 2.15 A.M., and immediately upon the interception, the statement of the driver in Form GST MOV-01 was issued on the same day. Simultaneously Form GST MOV-02 was also issued for physical verification/inspection of the conveyance.
• That the reason for the interception was the presumption of the Officer that the goods were proposed to be unloaded at an unregistered place, however no details with respect of that assumption were given.
• That on 13.08.2022, physical verification report was also issued in Form GST MOV – 04, however, no notice was issued to the petitioner under Section 129(3) of the CGST Act, which provides for issuance of show cause notice within 7 days of the detention/seizure.
• That on 17.08.2022, a representation was made by the petitioner explaining its case before the respondents and a request was made to permit the conveyance to proceed on its way. Being aggrieved this writ petition has been moved.

Petitioner’s Submissions: –

• It was submitted on the behalf of the petitioner that time frame, as set out in Section 129(1) & Section 129(3) have not been followed in the present case and no order of detention has been passed, without which the consignment ought not to have been retained by the authorities, upon interception.
• Referring to Section 129 of the Act, it was submitted that as per Section 129(3) a show cause notice stating the allegations and the penalty payable, has to be issued within 7 days. However, no notice till 24.08.2022 was issued.  Therefore, the procedure has not been followed in the present case and the actions of the respondents are irregular and contrary to the Statute and Regulations.

Respondents’ Submissions: –

• On the other hand, reliance was placed on the behalf of the respondents on Circular No.41/15/2018 – GST dated 13.04.2018 in CBEC-20/16/-3/2017-GST, issued by the Central Board of Indirect Taxes and Customs, GST Policy Wing, to draw the attention of the Court to the procedure to be followed. It was submitted that there is no statutory prescription for any of the forms that are referred to in Section 129.
• Further, it was submitted that the procedure to be followed, and the forms issued post interception, are only as per the mandate of the Circular issued by the Commissioner under Section 168 of the Act.
• It was submitted that the limitation of 7 days expired on a holiday, 19.08.2022 being Janmashtami, followed by Saturday & Sunday on 20.08.2022 and 21.08.2022, When the department does not function, the notice was liable to be issued only on 22.08.2022.

 Held: –

• The Hon’ble Court after considering the submission, facts of the case and the Circular dated 13.04.2018 relied upon on the behalf of the respondents, applied the procedure provided in the aforesaid Circular to the present case, and found that there are serious flaws in the procedure followed as neither order of detention nor SCN have been issued within time. That on combined reading of the proviso under Section 129(1) and 129(3) makes it apparent that the order of detention is intended to be issued prior to the issuance of the SCN, which, in terms of Section 129(3), must be issued within 7 days from the date of detention/seizure.
• Further, it was found that are other lapses also in the procedure followed by the respondents, such as i) the officer not having obtained written permission in Form GST MOV-03 from his superiors for extension of time for completion of inspection proceedings, ii) service of a copy of order of extension upon the person in charge of conveyance and iii) non-adherence to the requirement for uploading of Part-B of Form GST EWB-03 on the portal.
• It was noticed by the Hon’ble Court that incidentally the notice was not issued on 22.08.2022, but on 24.08.2022. Further Section 129(3) read with proviso thereunder, provides for issuance of show cause notice within 7 days of the detention or seizure. However, through an amendment brought to clause 2(e) of Circular dated 13.04.2018 vide Circular No.49/23/2018-GST dated 21.06.2018 in F. No. CBEC/20/16/03/2017-GST, the expression ‘three working days’ in the April circular has been replaced by the expression ‘three days.’
• Therefore, it was found by the Hon’ble Court that in matters of interception, seizure and detention, it is clear that the GST Department does not recognise the concept of ‘working day’ and ‘holiday’ as the substantial civil rights of the parties are at stake by the aforesaid powers and the detention must be decided at the earliest by the officials concerned.
• It was held that neither the petitioner nor the respondents can have the luxury of reference to a holiday to delay or protract the proceedings, which is copious clear from the Circular and the amendment brought about on 21.06.2018. Though, the submissions advanced on the behalf of the respondents run directly contrary to the amendment under the Circular and the purpose it evidently seeks to advance. These submissions are thus, found to be misconceived and hyper-technical, and are rejected.
• It was found that the acts of interception and retention, though an invasion into the rights of citizens, have been accorded statutory sanction in pursuance of the aims and objects of the Goods and Services Act. Thus, it has to be carried out in strict compliance of the statutory provisions in this regard. Further as the detention is a pre-condition/requisite for the issuance of the SCN, the order of detention is necessarily to be issued prior to the 7th day from date of detention/seizure of the conveyance /consignment in questione., on or before 20.08.2022 (in the present case), to validate both the interception and the SCN.
• The Hon’ble Court finding that there is no necessity to refer to the Section 10 of the General Clauses Act, 1897, relied upon on the behalf of the respondents in the present case, as the GST Department itself vide amendment dated 21.06.2018, removed the difference between a ‘working day’ and a ‘holiday’. Moreover, it has been confirmed on the behalf of the respondents that the interception, detention and seizure of vehicles and consignments take place without reference to day or time and the roving squad is on duty at all times, 24/7, 365 days of the year.  Thus, as the order of detention is dated 22.08.2022, it is clearly beyond the date provided and there is a serious flaw that vitiates the proceedings for interception in full and in entirety.
• Lastly the Hon’ble Court considering the submissions made on the behalf of the respondents that ‘statement of the driver accompanied with Form GST MOV – 02 – directions of the officer in the present case with respect to stationing the vehicle, physical verification and inspection of the goods as well as not to move the goods and the conveyance from the place at which it is stationed’ should be considered as an order of detention, found that this argument is liable to be rejected outrightly as there is a difference between the directions to the driver and order of detention in Form GST MOV – 06. That in case of directions, the risk and responsibility for the consignment remains with the transporter/consignor, whereas after passing of the order, the risk and responsibility in regard to the consignment shifts upon the GST Department.  Thus, the contention that Form GST MOV – 02 would tantamount to an order of detention, is entirely misconceived.

The Hon’ble Court with the above findings allowed the writ petition, holding that the procedure followed by the respondents in the present case is contrary to the Statutory requirements as well as the instructions issued by the Commissioner.  Further the contention of the revenue that ‘the Circular has no statutory force and the instructions thereunder are to be taken as flexible’, are rejected.